RBS repays £1.2bn, now plans dividends

Royal Bank of Scotland said on Tuesday it reached a milestone in its plan to resume dividends to shareholders when it repaid a final £1.193 billion to the UK Treasury to retire the “Dividend Access Share.”

The Dividend Access Share was issued in 2009 when the UK Treasury provided £25.5 billion of equity capital to RBS in exchange for B shares.

RBS was rescued in a state bailout during the global financial crisis and is still roughly 73% owned by the UK government.

“On the back of progress we have made in strengthening the bank’s balance sheet in recent years, I am pleased that we are today able to repay the UK Government £1.193 billion to finally retire the Dividend Access Share,” said Ross McEwan, RBS group chief executive.

“This is another important milestone in our plan to resume capital distributions to our shareholders, and represents one less hurdle in our path to build the number one bank for customer service, trust and advocacy.”

RBS said the final £1.193 billion payment will be reflected in its first quarter 2016 financial statements, reducing Tangible Net Asset Value per share by approximately 10p.

“On retirement, the Dividend Access Share will be re-designated as a single B share which will be subsequently cancelled,” said RBS.

“Following the conversion in 2015 of the B shares held by HMT into Ordinary Shares, the retirement of the DAS will complete the normalisation of RBS’s capital structure.”

Last month, RBS reported a 2015 loss of £1.98 billion, compared with a loss of £3.47 billion in 2014, as litigation and restructuring costs continued to hurt the company’s finances.

Excluding the litigation, conduct, restructuring and other costs, RBS actually made pre-tax operating profit in 2015 of £4.4 billion compared to £6.1 billion in 2014.

The bank said last month that it still planned to return excess capital to shareholders through dividends or buybacks, subject to board and regulatory approval — but this would now happen later than many investors had hoped.